Brent crude plunged to its cheapest level in almost 18 years on Monday and U.S. crude briefly tumbled below $20 a barrel as investors faced the growing prospect that the global coronavirus shutdown could last for months.
Brent crude futures fell just 2 cents to settle at $22.74 a barrel ahead of expiry. The more active June contract too fell just 7 cents to settle at $ 26.35 /bbl. WTI futures rose 39 cents to $20.48 a barrel, the lowest close since February 2002.
Crude oil benchmarks ended a volatile quarter with their biggest losses in history.
WTI plunged 54% during March and 66% for the first quarter, the biggest such declines since the contract’s inception in 1983. Brent fell 66% in the first quarter and 55% in March, the biggest quarterly and monthly percentage declines on record.
Oil drew some early buying after U.S. President Donald Trump and Russian counterpart Vladimir Putin agreed to talks on stabilising energy markets. However, prices fell in post-settlement trade after data from industry group the American Petroleum Institute showed U.S. crude inventories rose by 10.5 million barrels last week, far exceeding forecasts for a 4 million barrel build.
Weakness in futures markets has been surpassed by the physical markets, where cargoes are selling at single digits in key markets like Canada, Mexico and Europe, reflecting expectations for the coming collapse in demand that will strand barrels of oil.
U.S. crude output fell to 12.7 million bpd in January from 12.8 million bpd in December, the U.S. Energy Information Administration (EIA) said in a monthly report on Tuesday. That was the first time since July 2019 that U.S. crude output has declined two months in a row.
The US DOE plans to announce as soon as Wednesday it will allow oil companies to lease space in the SPR, as it seeks to comply with the US President’s directive to fill the facility to capacity, two industry sources said.
A rift in OPEC has widened after members failed to agree unanimously on an emergency low-level meeting to discuss the market collapse.
The Trump administration on Tuesday offered to begin lifting Venezuela sanctions if the opposition and members of President Nicolas Maduro’s Socialist Party form an interim government without him.
The US Secretary of State held out the possibility on Tuesday that the US may consider easing sanctions on Iran and other nations to help fight the coronavirus epidemic but gave no concrete sign it plans to do so.
China’s factory activity improved in Mar’20 after plunging a month earlier, with the Caixin/Markit Manufacturing PMI rising to 50.1 (+9.8 MoM) but the bare minimal growth highlighted the intense pressure facing businesses as the global coronavirus pandemic shuts down many countries.
South Korea’s factory activity fell at its fastest pace in 11 years in Mar’20, with the Markit Manufacturing PMI plunging to 44.2 (-4.5 MoM), the lowest since Jan’09.
The API data released today, while showing a huge rise in both crude and gaosline stocks, showed a huge fall in distillate stocks. And it is going to be this part of the barrel which will eventually support the refining industry for the coming few months.
At a global level, the death toll from the COVID-19 virus rose to 42,158 (+4,343 DoD) yesterday, with the total number of confirmed infections at 858,892 (+83,115 DoD). (Click here for details).
Asia’s naphtha crack dropped more than 10% to $19.08 a tonne on Tuesday as prices of its raw material, Brent crude, bounced back.
Naphtha fundamentals were weak due to expanded supplies, which drove the intermonth spread down to parity from a small premium of 50 cents in the previous session.
However, April volumes could be affected by worldwide run cuts as refiners combat falling demand for oil products amid lockdowns and travel bans against the coronavirus. China will grant export quotas for refined oil products to non-state refineries in the Zhejiang pilot free trade zone, the state council said in a statement on Tuesday. Fuel export quotas have only been granted to state-backed oil firms in the past. However, the statement did not specify volume and timeframe criteria in the new policy.
The April crack is lower at -$4.90 / bbl.
No fresh news on gasoline markets.
The April crack has improved to -$4.80 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash differentials for jet fuel weakened further on Tuesday, hitting a more than 11-year low. Cash discounts for jet fuel widened to $2.96 per barrel to Singapore quotes on Tuesday, a fresh low since October 2008. The jet spot differentials were at a discount of $2.70 per barrel on Monday.
The April/May time spread for jet fuel in Singapore widened its steep contango to trade at a discount of $2.85 per barrel on Tuesday.
Cash discounts for 10 ppm gasoil widened to 76 cents per barrel to Singapore quotes on Tuesday, a level not seen since December 2018. They were at a 61-cent discount on Monday.
The April crack for 500 ppm Gasoil has dropped to $10.25 /bbl with the 10 ppm crack at $ 11.75 / bbl. The regrade is at -$ 6.90 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s front-month 0.5% VLSFO price differential against 380-cst HSFO fell to a six-session low on Tuesday, hovering near last week’s record low. The VLSFO-HSFO price spread for April fell to $73.50 a tonne, down from $82 a tonne in the previous session.
The April crack for 180 cst FO has once again jumpted -$0.05 /bbl with the visco spread at $0.80 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
We will reinstate the FO 180cst crack hedge for May 2020 at today’s level of -$2.75 per barrel. Prices are extremely volative and it is sound hedging practice to put in places at good levels.
Hedge recommendations are essentially made for refiners. These are not trading positions as such. The rationale of these positions is to lock in extraordinary levels for the refinery.
Click Here to see how all our recommendations have fared
About this blog
This blog post attempts to give a top level summary of the Singapore market goings on to a person who seeks to obtain a directional sense of the market on a daily basis.